TravelSky Technology reported 1H26 revenue of RMB4,112mn (+5.6% YoY) and attributable net profit (NP) of RMB1,543mn (+6.6% YoY), with the latter largely in line with our forecast of RMB1,550mn. In 1H26, although revenue from aviation information platform services fell slightly YoY, revenue from airport digitalization rose by a significant margin YoY. Supported by lower costs, the operating profit margin (revenue minus total operating costs) rose by 3.5pp YoY. Looking ahead, we expect China's civil aviation travel demand to grow steadily. As a leading civil aviation IT services provider, the company could enjoy incremental profit contributions from its airport digitalization and aviation travel intelligent products and services. Maintain BUY.
ETD systems: processing volume remained largely flat
High oil prices and airline flight cuts caused air travel demand to drop QoQ in 2Q26. The company's electronic travel distribution (ETD) system processing volume rose by 0.3% YoY. The processing volume of foreign airlines picked up by 0.7% YoY to only 46% of the 1H19 level. In addition, RMB appreciation weighed on the unit price charged to foreign airlines (in RMB terms), causing revenue from aviation information platform services to fall by 1.7% YoY to RMB2,352mn. Revenue from information network and digital infrastructure services dropped by 8.9% YoY to RMB257mn, primarily as distribution IT service volume fell. However, revenue from accounting, settlement and clearing services rose by 11.4% YoY to RMB454mn, which we believe was supported by rising global civil aviation demand.
Airport digitalization services: profitability improved in 1H26
For 1H26, airport digitalization revenue grew by 43.5% YoY to RMB600mn, driven by more projects ready for completion and acceptance. Meanwhile, software and hardware costs for airport digitalization fell by 48.7% YoY to RMB103mn on a lower share of procurement. This markedly improved the profitability of airport digitalization services in 1H26. Per our estimate, gross profit grew by 129% YoY. Revenue from aviation travel intelligent rose by 14.9% YoY to RMB442mn, primarily driven by rising client demand for IT services and product expansion.
We trim our 2026/2027/2028 attributable NP estimates by 3/1/2% to RMB2,505/2,857/3,126mn, and project EPS of RMB0.86/0.98/1.07. Our downward revisions reflect slowing ETD processing volume growth as air travel demand remains constrained by high oil prices and other factors. Based on average PE ratio over the past decade and the latest HKD/RMB exchange rate, we value the stock at 14.0x 2026E PE. Our target price is HKD13.90 (2026E EPS of RMB0.86; previous: HKD15.70, based on 16.0x 2026E PE). Maintain BUY.
Risks: weaker-than-expected air travel demand, weaker-than-expected operations of businesses other than aviation information platform services, IT talent loss and cost hikes.